2017 ASSA Annual Meeting

The 2017 Annual Meeting will take place in Chicago, IL on January 6-8, 2017 (Friday, Saturday, & Sunday). The headquarters hotel will be the Hyatt Regency Chicago; the co-headquarters hotel will be the Sheraton Grand Chicago Hotel & Towers.

Hosted By: African Finance and Economics Association

January 7-8, 2017 - Chicago, Illinois

Saturday, January 07, 2017

8:00 AM – 10:00 AM, Hyatt Regency Chicago, Wright
Hosted By: National Economic Association & African Finance and Economics Association
Taxes, Poverty, Incentives and Market Outcomes in Africa (O1, H2)
Paper Session

Chair: Bichaka Fayissa, African Finance and Economic Association

Competition and Prosociality: A Field Experiment in Ghana
Angelino Viceisza, Spelman College
Kerstin Grosch, University of Goettingen
Marcela Ibanez,University of Goettingen

Competitive payment mechanisms are commonly used to promote higher productivity in the workplace. Yet, these types of incentives could reduce workers' willingness to cooperate in subsequent tasks. In this paper, we explore this question by conducting a lab-in-the-field experiment with workers from a low-productivity agrobusiness in rural Ghana. To investigate how prosociality towards a co-worker evolves, we use a between-subjects design where participants complete a real-effort task under a competitive, threshold, or random payment. We measure prosocialty before and after this task through (1) a public goods and (2) a social-value orientation game. We find the effect of competition on changes in prosociality to be context-specific. Competition reduces prosociality when the dispersion of payments is high, an effect that is driven by high earners who win the competition. However, when there is less at stake, competition can increase cooperation. This effect seems to be driven by those who lose the competition. Interestingly, the competitive payment scheme has no significant effect on average effort/output levels. We combine our experimental and survey data with firm-administrative data in order to explore how experiences in and outside of the lab might interact and derive some potential implications for workplace policy.

Financial Reform, Inclusion and Mobile Money in Nigeria
Lisa D. Cook, Michigan State University
Yanyan Yang, Claremont Graduate University

In this paper, the analysis of Cook (2011) on the effectiveness of financial reforms in Nigeria for the financial system and for the poor is extended with newly available published and survey data. I find that the share of banked adults nearly doubled between 2008 and 2014. In general, financial exclusion has diminished among Nigerian households. However, financial engagement related to productive activity – investment in starting, operating, and expanding businesses and in human capital – has fallen considerably over the period. We observe that this continues a trend starting in the early 1990’s and could constrain economic growth in the short and medium run. In addition, we find that mobile money has not had the significant effect on financial inclusion in Nigeria that its rates of adoption of mobile telephony would suggest nor that the literature has found in Kenya and Tanzania.

The Resilience of the Poor: A Markov Chain Analysis of Heterogeneity in Subjective Poverty
Elizabeth Asiedu, University of Kansas
Theophile T. Azomahou, Maastricht University, UNU-MERIT, University of Clermont Auvergne and CERDI
Eleni A. Yitbarek, Maastricht University and UNU-MERIT

We consider a Markov chain framework to study the dynamics of subjective poverty in urban Ethiopia using an unbalanced panel of 1,500 households over a decade. We measure subjective poverty as three points ordinal scales defining three states: rich, borderline and poor. Our framework allows alternative specifications of unobserved heterogeneity as a random effect dependent on: households and poverty departure state, household and transition poverty profile, and household only. We identify both transitory and permanent effects. The preferred specifications involve heterogeneity (existence of frame-of-reference bias). Own consumption have imperfect but strong positive effect on upward transitions. The presence of unemployed household members increases subjective poverty at a given income. We find little evidence of relative deprivation effects on poverty. Human capital is a strong determinant of upward poverty transition. Further, larger households enjoy greater economies of scale, but the structure of a household matters. Having more number of children in the household raises subjective poverty. On the other hand, we find no evidence to support the role of positive income trajectories in rating self-welfare. Households on positive consumption trajectories are not likely to rate their welfare higher, but initial level of poverty is an important determinant of future poverty. Social capital (membership in volunteer institutions) raises the probability of downward mobility of subjective poverty. Finally, the older household head, the lower chance to transit to poor state.

Tax-Man's Dilemma: Coercion or Persuasion? Evidence from Randomized Field Experiment in Ethiopia
Abebe Shimeles Abebe, African Development Bank
Daniel Zerfu Gurara, International Monetary Fund
Firew Bekele Woldeyes, Ethiopian Development Research Institute

Tax evasion is one of the most pervasive problems confronted by tax authorities across the developing world, particularly in Africa. We analyze a randomized trial of two innovative anti-tax evasion schemes in Ethiopia that signals higher probability of audit and severity of punishment and complimentary messages that encourage tax morale. Our results indicate that the threat of audit reduces tax evasion significantly (over 50%), and its effect is higher in businesses that are deemed to be prone for tax vasion, such as imports and wholesale activities. We also find that appealing to the tax morale promotes compliance, almost comparable to that of audit threat. Either way, efforts on the part of the tax authority to enhance compliance can be effective depending on the type of businesses and preference structure of tax payers. We explore concerns with spillover effects, differences among tax payers- corporate vs self-operated businesses, and nature of business activities. Steps to address these concerns leave the main findings fundamentally unchanged.

Anat Bracha, Federal Reserve Bank of Boston
Ejindu Ume, Miami University
Stephen Armah, Aseshi University
Miesha Williams, Morehouse College

JEL Classifications
H2 - Taxation, Subsidies, and Revenue
O1 - Economic Development

10:15 AM – 12:15 PM, Hyatt Regency Chicago, Ogden
Hosted By: African Finance and Economics Association
Role of Fiscal Policy in Promoting Food Security, Social Protection, and Value Added in Manufacturing Through Human and Social Capital Development in African Countries (O1, H3)
Paper Session

Chair: Edward E. Ghartey, University of the West Indies

Trends in Agricultural Production Efficiency and Its Implications for Food Security in Sub-Saharan African Countries
Bichaka Fayissa, Middle Tennessee State University
Christian Nsiah, Baldwin Wallace University

The population size of the 54 African states passed the 1 billion mark in 2009 and continues to grow at rate in excess of 2% per year. In the absence of effective and focused measures to slow down the rate of growth through education and family planning including delayed marriage and abstinence, the population is expected to double in 27 years. With the young and relatively more educated migrating to the cities in search of job opportunities and other amenities of life which typically have concentrated in and around the major cities in Africa, the rapid growth of armies of unemployed youths in the urban areas pose a ticking time bomb all around the continent. In the backdrop of these scenarios, the fragmentation of land among the growing rural population and the intense pressure of transnational land transactions (known as land grabbing) expose farmers and urban dwellers to severe food insecurity and livelihood vulnerabilities posing major concerns which African governments have to address sooner than later. The main objective of this paper is to estimate trends in the production efficiency of the agricultural sector over time using data envelopment analysis (DEA) and cross country data in order to assess the state of food security, or insecurity in the continent. In particular, the study will explore the impacts the conventional sources of economic growth such as education, aid for agriculture, infrastructure investment, and governance on the rate agricultural production efficiency. We will analyze crop and cereal, livestock, and overall food production efficiency from 1995 to 2012. Preliminary results suggest that the importance of these control variables in promoting or impeding the productive efficiency of the agricultural sector over time with significant implications for food security in the African continent.

Investigating the Desirability of the 'Old People's Home' as a Viable Business in Ghana
Wendy D. Akinny, Ashesi University College
Stephen E. Armah, Ashesi University College

Ghana's population is ageing but the Ghanaian government is not making sufficient efforts to cater for the needs of the elderly. This study proposed the "Old People's Home" as a solution to elderly care and investigated whether it will be viable in Ghana. A 3-pronged strategy was employed: (i) Questionnaires and interviews were administered to 60 potential family caregivers, aged between 25 and 59. (ii) The owner of an existing Old people's home in Accra was interviewed to highlight challenges faced and evaluate the sustainability of such a venture and (iii) financial analyses were conducted to assess the feasibility of a hypothetical Old people's home. Findings indicate majority of the respondents did not want to patronize Old People's Homes as a result of their attitudes, cultural beliefs and general economic hardship. However, the "Old People's Home" may be viable if people's views about care homes change. The financial analysis concluded that the Old People's Home could be sustained as a business as long as there were at least 15 customers under care. However, given the difficulty in attracting customers, and in changing people's views about Old People Homes, the study finds evidence against such a venture in the short term.

Lucas Critique, Time Inconsistency and Economic Integration in Africa
Oladele Omosegbon, Indiana Wesleyan University and Indiana Purdue University

As far as the African Union, AU, is concerned, the continent should move, inexorably, towards a peaceful, prosperous and integrated continent. The paper shows why, in part, this goal has either, so far, eluded AU, its constitutive agencies and its member states. The paper faults the [intellectual] minds, as expressed in various communications, including by policy advisers, academicians and politicians alike, on which the movement and behavior of the continent toward a united continent has been built. The paper draws on the Lucas Critique as an expression of time or dynamic inconsistency, as a veritable explanation for the yawning gap between the predictions of models and policy implementation success in Africa. The idea is and in disagreement with the rational choice model, that agent's or decision maker's preferences do change over time and therefore, the optimality conditions or behaviors on which economic integration were constructed, in the first place, are now violated. Evidence is drawn from the efforts of the regional economic communities, RECs, and from the African Union's policy agreements. Further examples are presented from leading research and scholarship and from core policies aimed at bringing about custom or monetary unions. As an illustration, political pressure arising from proto nationalism and external colonial ties often sway member countries to take measures that are different from those agreed upon earlier in the RECs. These would include agreements on common currency, the free movement of people and labor and on free trade. The paper then offers plausible solutions to the observed Lucas Critique and time inconsistency problems in the modeling of African economic integration and African development.

Manufacturing Value Added Development in North Africa: Analysis of Key Drivers
John C. Anyanwu, African Development Bank

It is widely recognized that structural transformation lies at the heart of economic development of any nation. Recent research suggests that the industrial sector, especially manufacturing, is a key engine of growth in the development process, including that of North Africa. The necessity for structural transformation in North Africa arises from the fact that the sub-region needs high and sustained economic growth in order to make significant progress in generating increased productive and quality jobs and livelihood for its teeming population, especially the youth. Unfortunately, manufacturing development in North Africa has not improved over time. For example, its manufacturing value added (MVA) in world MVA accounted for only 0.10 percent of world MVA in 2013. Also, the share of North African MVA in GDP was just 16.00% in 2013 compared with Asia & Pacific's 25%. This paper empirically assesses the key determinants of manufacturing value added in the sub-region using a time series cross-sectional data set of the countries for the period, 1970 to 2013. Two estimation techniques, the pooled panel OLS regression with year fixed effects and the IV-GMM estimation procedure, were used. We find the following factors exerting significant positive effect on manufacturing added in North Africa: domestic investment, openness of the economy, education, dependence on gas rents, government consumption expenditure, and manufactured exports. There is also a strong support for a non-monotonic, U-shaped relationship, between MVA with economic development. On the other hand, the results indicate that democracy, dependence on oil, mineral and forest rents, level of manufactured imports, higher urbanization, dependence on official development assistance and foreign aid, and civil violence have significant negative effect on MVA in the sub-region. The paper concludes with policy recommendations.

Assessing the Effects of Trade-Induced Technology Imitation on Economic Growth in Africa
Jean-Claude Maswana, University of Tsukuba

The study aims at quantifying the effects of trade-induced technology imitation (proxied by the share of imports in the "easy imitation" Standardized International Trade Classification (SITC) category) on economic growth in Africa, using a production function approach in a panel system-GMM estimator. Indicators of trade-induced technology imitation have been built on the Standard International Trade Classification (SITC) using raw data from the United Nations’ COMTRADE Statistics. Findings suggest that economic growth tends to be greater in countries with higher ratios of technology imitation conditional to the level of human capital index. Another noticeable finding is that the lower the level of GDP per capita, the higher the growth effects of technology imitation relative to other forms of technology progress.

Efficiency and Productivity Growth in Health Care Systems in Ghana: Regional Comparative Analysis Using DEA
Samuel Amponsah, Institute for International Strategy
Edward Amanfo, Tokyo International University

This paper examines the relative efficiency scores of the healthcare system of the ten regions in Ghana. We apply data envelopment analysis (DEA) and Malmquist Productivity Index (TFPI) using balance panel data from 2000-2014. The resulting TFPI from our study is decomposed to investigate changes in technical efficiency and technological progress components. Our preliminary results indicate that the annual productivity growth averaged 0.093 per cent, and is largely due to positive change in efficiency. Our results in conjunction with national health outcomes data indicate that greater proportion of the DMUs experienced improvement in health outcome from 2001 to 2014 relative to inputs usages.

Oladele Omosegbon, Indiana Wesleyan University/Indiana Purdue University of 1st Paper
Christian Nsiah, Baldwin Wallace University of 2nd Paper
Wendy D. Akinny, Ashesi University College of 3rd Paper
Samuel Amponsah, Tokyo International University of 4th Paper
John C. Anyanwu, African Development Bank of 5th Paper
Jean-Claude Maswana, University of Tsukuba of 6th Paper

JEL Classifications
H3 - Fiscal Policies and Behavior of Economic Agents
O1 - Economic Development

1:00 PM – 3:00 PM, Hyatt Regency Chicago, Comiskey
Hosted By: African Development Bank/African Finance and Economics Association
AFEA/AFDB Joint Luncheon and Keynote Address
Event (Invitation Only)

7:00 PM – 8:00 PM, Hyatt Regency Chicago, Water Tower
Hosted By: African Finance and Economics Association
AFEA Presidential Address

8:00 PM – 9:00 PM, Hyatt Regency Chicago, Wright
Hosted By: African Finance and Economics Association
AFEA Board Meeting
Event (Invitation Only)


Sunday, January 08, 2017

8:00 AM – 10:00 AM, Hyatt Regency Chicago, Ogden
Hosted By: African Finance and Economics Association
Driving Social Capital, Sectoral Development, Income Distribution and Banking Practices With Effective Policies to Achieve Economic Growth in African Economies (O1, E5)
Paper Session

Chair: Bichaka Fayissa, Middle Tennessee State University

Empirical Evidence of Nonlinear Effects of Monetary Policy Reaction Functions in a Developing Country
Edward E. Ghartey, University of the West Indies

The paper examines nonlinear effects of monetary policy reaction function using 1978-2015 annual sample with threshold autoregression (TAR) and traditional models to find out how Bank of Ghana (BOG) reacts to achieve its primary goals when inflation rate deepens. Estimating linear functions to capture temporary monetary policy reaction functions to assess reactions of Central Banks' monetary policy, especially in developing countries, often suffer from serial correlation, heteroscedasticity and functional instability problems. We remedied these problems by using interest rate to minimize a quadratic nonlinear loss function to derive an asymmetric TAR model. We then identified logged price as the threshold variable, with one threshold value in a two inflation regimes from designated output and inflation threshold variables, and two threshold values in a three inflation regimes when exchange rate is included in the designated threshold variables. In all inflation regimes, the BOG responds to external account deficits, and in a low inflation regime, it responds to both inflation and output. In the moderate inflation regime, it responds to only output. In the high inflation regime, it responds to only inflation in the two inflation regimes, and to both output and depreciation in the three inflation regimes. Both Engle-Granger and asymmetric error correction estimates indicate that temporary deviations of interest rates from a long-run equilibrium are symmetrical, with the speed of adjustment being fast in the former, and in the latter case, where the negative phase of deviations is persistent and seems to be temporarily asymmetrical. Furthermore, both threshold and Engle-Granger cointegration tests are supported by Johansen cointegration tests. Thus, the symmetric policy response results in both short term and long-run are consistent with the central bank’s public stance of pursuing inflation targeting policy to reduce inflation, even though it is ineffective in moderate and high inflation regimes.

Democracy and Income Distribution in Sub-Saharan Africa
Isaac O. Mensah, Bank of Ghana
Richard A. Twumasi, University of Kansas

The study sought to evaluate how democracy impacts on income distribution in sub-Saharan Africa. Using panel data regressions spanning 1960-2011, the study found out that the impact of democracy on equal distribution of income in sub-Saharan Africa is positive. However, it did not show significant direct impact on income distribution as expected. The study found no evidence to support the presence of an inverted U-shaped effect of democracy on income distribution in the region, but the trend in the results suggests that democracy has indirect effects on income distribution. The impact of democracy on income distribution in sub-Saharan Africa was found to be significantly dependent on how stable a country’s democracy is, and was also found to be marginally dependent on economic development. A good combination of democracy and political stability is crucial to the reduction of income inequality in sub-Saharan Africa.

Social Capital and Adoption of Sustainable Management Practices of Non Timber Forest Product in Cameroon
Sophie Michelle Eke Balla, University of Yaounde 2

The renewable resource character of non-timber forest products (NTFPs) is an opportunity to it sustainability, this study analyzed the role of social capital in the adoption of sustainable management practices of NTFPs by households in the community forest (CF) Morikouali-ye. The analysis shows that 67% of households surveyed perceive the level of degradation of NTFPs in their CF as time passes and are close to 74% for adoption of sustainable management practices of NTFPs that are domestication, sustainable management of the CF, the logging ban trees and uprooting plants, etc. 26% refused to adopt these practices estimate that, at 39% it is better to promote logging in the CF. The estimated probit model shows that social capital through trust, solidarity and social inclusion significantly influences the probability of households to adopt sustainable NTFP management practices. In addition, age, education level and income from the sale of NTFPs have a significant impact on the probability of a doption. The probability of adoption increases with the level of education and confidence among households. So should they be animated by a spirit of solidarity and trust and not let a game of competition for sustainable management of NTFPs in their CF.

Behavioral Determinants of Biofortied Food Acceptance: The Case of Orange-Fleshed Sweet Potato in Ghana
Chinonso Etumnu, University of San Francisco

Biofortifed foods are being introduced in sub-Saharan Africa as an important strategy to help address micronutrient malnutrition. However, there has been little research on factors that could play decisive roles in their successful introduction. This paper investigates the determinants of consumer acceptance of biofortied orange-fleshed sweet potato (OFSP) using data from a choice experiment conducted in Ghana. I find that OFSP is preferred to traditional white-fleshed and yellow-fleshed sweet potatoes as indicated by consumers' marginal willingness to pay for the three varieties. I also find that respondents' socio-economic characteristics do not have a significant effect on consumer acceptance of OFSP. Conversely, providing consumers with information about the nutritional benefits of OFSP exert a substantial, positive and significant effect on their acceptance of the produce. Providing nutritional information thus appears to be more crucial in the successful introduction of OFSP and other biofortified foods.

Climate Change Effects on Cocoa Export: Case Study of Cote d'Ivoire
Salifou K. Coulibaly, Hunan University
Terence M. Metuge, Hunan University
Cao Erbao, Hunan University
Zhang Ya Bin, Hunan University

This paper attempts at examining the long-run effect of climate change on export revenue of the cocoa industry of Cote d’Ivoire. We apply an autoregressive distributed lag approach using time-series data from 1966-2011 to investigate this phenomenon. The results indicate that precipitation may affect cocoa export revenues in the Ivorian economy. This finding, is in accordance with Jones and Olken (2010) study that supports the notion of the negative effects of precipitation on exports in least developing countries.

Start-Up Capital and Female Entrepreneurship in Africa: Evidence from Swaziland
Zuzana Brixiova, University of Cape Town
Theirry Kangoye, African Development Bank

This paper examines gender differences in the amount and type of start-up capital and their links with entrepreneurial performance. It uses 2012 UN Swaziland Survey data of entrepreneurs to estimate a probit model with OLS and Quantile regression in a multivariate analysis. The empirical analysis from Swaziland shows that both women and men entrepreneurs with higher start-up capital and those who fund it from the formal financial sector post higher sales than those with smaller capital funded from other sources. Similarly to other African countries, women entrepreneurs in Swaziland have smaller start-up capital and are less likely to finance it from the formal sector than men. Further, women who receive family and professional support tend to start their firms more often with loans from formal sources than women without such support, pointing to a room for policy interventions.

Richard A. Twumasi, University of Kansas of 1st Paper
Theirry Kangoye, African Development Bank of 2nd Paper
Chinonso Etumnu, University of San Francisco of 3nd Paper
Salifou K. Coulibaly, Hunan University of 4th Paper
Sophie Michelle Eke Balla, University of Yaounde 2 of 5th Paper
Edward E. Ghartey, University of the West Indies of 6th Paper

JEL Classifications
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
O1 - Economic Development